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South Africa’s financial regulator has levied a record R475mn ($25mn) fine for an individual against Markus Jooste, the former chief executive of Steinhoff, seven years after revelations emerged of fraud at the furniture retailer.
Steinhoff was once the second-largest furniture retailer in Europe with brands including Conforama and Poundland in the UK, as well as being one of the biggest companies on the Johannesburg Stock Exchange.
However, it was plunged into crisis in 2017 amid a probe into irregular accounting that wiped more than 85 per cent from its share price. Investigators at PwC said in 2019 that Steinhoff’s financial statements had been boosted by €6.5bn in “fictitious or irregular” transactions over more than a decade.
The scandal remains South Africa’s largest corporate fraud and Steinhoff has since been delisted from the JSE and is now owned by its creditors.
Jooste resigned in the wake of the scandal and was later referred by Steinhoff to South Africa’s anti-corruption police.
The Financial Sector Conduct Authority (FSCA) said on Wednesday that the 63-year-old “made or published false, misleading or deceptive statements about Steinhoff” while engineering transactions with “no economic substance”.
This dishonesty “misled the market into believing Steinhoff International was more profitable, more cash positive and more resourced than what was indeed the case”, the regulator said.
“This is the largest fine we’ve ever levied on an one individual,” Unathi Kamlana, head of the FSCA, told the Financial Times. “In part, this is because of the scale of the fraud, but it’s also vital that we send a message to the corporate sector, and other CEOs, as a deterrent.”
While German authorities have issued an arrest warrant for Jooste in Germany, where Steinhoff was also listed, he has yet to face charges in South Africa, where the case is seen as a test of whether the criminal authorities are able to prosecute complicated white-collar crime.
The size of the fine reflects the damage the Steinhoff scandal inflicted on South Africa’s credibility as a financial market and on investor confidence.
“Described as South Africa’s Enron, [this case] left a lasting suspicion of the quality of South African published annual financial statements. The high levels of publicity and public disgust expressed about the accounting irregularities and the ongoing news articles indicate that it is an issue that continues to be of concern to the investing public,” said the FSCA.
The regulator also considered the fact that between 2014 and 2017, Jooste was paid R651.5mn by Steinhoff.
The FSCA, which in 2022 fined Jooste R20mn for insider trading, said in its ruling that Jooste had “intentionally lied”.
Jooste did not respond to a request for comment. The former executive has previously said he was unaware of an accounting black hole — a line he stuck to when he spoke to South Africa’s MPs in 2018 — despite the findings of PwC and German criminal investigators.
